Companies left China to dodge tariffs. Now some are heading back

A year after shifting production to avoid higher U.S. tariffs, some companies are finding that replicating China's factory ecosystem is proving difficult and are returning manufacturing operations to the country. Heated metals producer Dawang Metals lost business when a major U.S. customer switched some orders to India and has since reintroduced new orders, according to vice president Heather Kuang.

The family-owned company from Dandong, China, explored offshore production but ultimately decided domestic production was more feasible. Despite the challenges, companies continue to invest in Southeast Asian manufacturing hubs, but the "China plus one" strategy has proved harder to execute. While hard data on sourcing returning to China is not yet available, some buyers said they are keeping or restoring Chinese suppliers due to issues with foreign factories.

Manufacturers are also attracted to Vietnam, Indonesia and India despite persistent concerns. The return of U.S. demand is uncertain, and companies are watching the upcoming Trump-Xi summit for clarity on a proposed mechanism to lower barriers on non-sensitive goods.